Mississippi swelling raises gasoline supply fears

BenLefebvre

HOUSTON (MarketWatch) -- Severe rain in the Southeast has forced the closure of several fuel terminals along the Mississippi River and helped raise the price of wholesale gasoline in the Midwest, traders said Monday.

The flooding has combined with fears of potential refinery outages in the region to prop up wholesale gasoline prices in the Midwest despite dropping crude oil costs. Bids for unleaded conventional grade gasoline in the Chicago market was 20 cents a gallon above June RBOB prices on the New York Mercantile Exchange, up more than 10 cents from Friday despite last week's dramatic drop in oil prices.

"Traders are worried about river transport and production issues," a Houston-based oil and products trader said.

Extreme rain has caused a record-high swell in the Mississippi River near Memphis that is working its way downstream. Closures of several fuel terminals along the river and possible U.S. Coast Guard restrictions on barge traffic have made traders worry about supply distribution.

One terminal in Vicksburg, Miss. is expected to run out of product early next week, a fuel trader said. The river in that area is currently higher than 50 feet, or seven feet above its flood stage, making barge traffic difficult.

"Apparently the terminal is fine, but the dock is underwater with no chance for resupply," the trader said.

Meanwhile, Chevron Corp.
CVX, +0.54%
reported an early-morning fire Monday at one of the crude distillation units at its 330,000 barrel-a-day refinery in Pascagoula, Miss. Traders were already worried that problems with the gasoline production units at Exxon Mobil Corp.'s
XOM, +0.38%
238,000 barrel-a-day refinery in Joliet, Ill., and planned maintenance at BP PLC's (BP, BP.LN) 405,000 barrel-a-day refinery in Whiting, Ind., have reduced fuel supply in the region.

Exxon said operations were stable at its refinery despite the upset of its sulfur recovery unit.

Oil futures remained below $100 a barrel in mid-day trading, down $10 from the week before. But flood-induced disruptions or outright refinery outages could keep gasoline prices high, said Jason Schenker, president of Prestige Economics.

"Prices could go markedly higher if significant refinery capacity were to be disrupted, especially ahead of the driving season," Schenker said.

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